Oil prices pulled back Tuesday morning, despite ongoing talk of possible production curbs in Libya and Nigeria and news of shrinking U.S. stockpiles.
Brent crude, the global benchmark, fell 0.5%, to $46.63 a barrel, in London midmorning trading. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.5%, at $44.16 a barrel.
"The situation remains unstable," said Eugen Weinberg, head of commodity research at Commerzbank. Markets, he said, remain "a bit on the bearish side."
Prices fell 6% in the three sessions ending last week before beginning a tepid recovery Monday during U.S. trading, boosted by news that the Organization of the Petroleum Exporting Countries could pressure Nigeria and Libya to curb oil production.
Both are members of OPEC but exempt from the group-led agreement to cut global output by 2%. The exemption was meant to allow their production to rebound following years of fighting between the countries' governments and local insurgents, which blunted output. In recent months, production has risen strongly, offsetting some one-third of the cuts made so far this year by the cartel and its allies.
The output-cap exemptions for Libya and Nigeria have drawn ire from some fellow producers, and the issue is expected to be discussed when OPEC's monitoring panel meets on July 24 in Moscow.
Pushback from Nigeria and Libya to continue exemptions is expected to be strong, said Tim Evans, a Citi Futures analyst. But they may "be open to some form of limits if the right financial incentive can be found."
But if the two countries were willing to simply not raise output further, it is unclear if that would help reduce the continuing global oil glut.
"The rather muted price reaction thus far highlights that there is probably little conviction out there that such a cap would actually end up being lower than current production levels," analysts at JBC Energy wrote in a note Tuesday morning.
Prices had also been helped Monday when data provider Genscape said stockpiles at Cushing, Okla., shrank 2.1 million barrels from June 30 to July 7, according to a person who had reviewed the report. Cushing is the delivery point for the benchmark U.S. West Texas Intermediate oil contract and often regarded as a bellwether for supply and demand trends.
Traders and analysts were looking ahead to the monthly reports of OPEC and the International Energy Agency, to be released Wednesday and Thursday, respectively.
Nymex reformulated gasoline blendstock -- the benchmark gasoline contract -- was down 0.70%, to $1.4002 a gallon. ICE gasoil changed hands at $429.00 a metric ton, down 1.04% from the previous settlement.
Timothy Puko contributed to this article.
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Oil prices rose Tuesday as traders and investors anticipated that U.S. data will show that a glut of oil is continuing to shrink.
U.S. crude for August delivery settled up 64 cents, or 1.44%, at $45.04 a barrel. Brent, the global benchmark, rose 64 cents, or 1.37%, to $47.52 a barrel.
Market participants are expecting that the U.S. Energy Information Administration will report a drop in U.S. stockpiles in its weekly report, due Wednesday morning.
The weekly data has become an important barometer as investors and traders watch to see whether output reductions by the Organization of the Petroleum Exporting Countries and other major producers are helping to bring down global oil inventories.
"You continue to see draws in the U.S., ratcheting up expectations that maybe the cuts are having an effect," said Gene McGillian, research manager at Tradition Energy. "People don't want to be too exposed below the lower-$40 mark."
Analysts surveyed by The Wall Street Journal are expecting the data to show that U.S. oil stockpiles fell by 3.2 million barrels last week.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed an 8.1-million-barrel decrease in crude supplies, an 801,000-barrel decline in gasoline stocks and a 2.1-million-barrel increase in distillate inventories, according to a market participant.
Oil prices edged lower in earlier trading Tuesday on reports that Saudi Arabia pumped more oil in June, exceeding the output cap it agreed to for the first time since OPEC's cuts went into effect. A person familiar with the matter said Saudi Arabia produced 10.7 million barrels a day last month, about 12,000 barrels a day more than it promised agreements struck with OPEC and other big producers like Russia late last year.
But prices quickly began to move higher again, settling up for the second day in a row.
"We're approaching the time frame on the calendar that is a very traditional bull market. I think the market's trying to come up with some excuse to start that cycle again," said Donald Morton, senior vice president at Herbert J. Sims & Co., who oversees an energy trading desk. "Drillers are drilling, producers are producing -- it's coming at us in a wash, but in the short term nobody is panicking as they were."
Talk of production cuts in Libya and Nigeria have helped boost prices this week. Both are members of OPEC but exempt from the group-led agreement to cut global output by 2%. The exemption was meant to allow their production to rebound following years of fighting between the countries' governments and local insurgents, which blunted output. In recent months, production in those countries has risen strongly, offsetting some one-third of the cuts made so far this year by the cartel and its allies.
The output-cap exemptions for Libya and Nigeria have drawn ire from some fellow producers. The issue is expected to be discussed when OPEC's monitoring panel meets July 24 in Moscow.
Rising output from the U.S. has also undermined OPEC's efforts to work down the supply glut, but low prices may slow some drillers down. On Tuesday, the U.S. EIA trimmed its forecast for U.S. output next year: it now expects U.S. production to average 9.9 million barrels a day in 2018. That is still a record high level, but down slightly from its previous forecast that output would average 10 million barrels a day next year.
"A lower forecast for crude oil prices is expected to shave a little off projected growth in U.S. oil production next year," acting EIA Administrator Howard Gruenspecht said in a statement.
Gasoline futures rose 1.76 cents, or 1.17% to $1.5183 a gallon on the New York Mercantile Exchange. Diesel futures rose 2.27 cents, or 1.56%, to $1.4763 a gallon.
Summer Said and Jenny W. Hsu contributed to this article.
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(END) Dow Jones Newswires
July 11, 2017 17:11 ET (21:11 GMT)